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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from   to

Commission file number 001-39291
EOS ENERGY ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware84-4290188
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
3920 Park Avenue
EdisonNJ08820
(Address of Principal Executive Offices)(Zip Code)
(732) 225-8400
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.0001 per shareEOSEThe Nasdaq Stock Market LLC
Warrants, each exercisable for one share of common stockEOSEWThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes        No  
The registrant had outstanding 74,100,703 shares of common stock as of November 2, 2022.



Table of Contents
Page
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021
Item 1a.
Risk Factors
1

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
This report contains statements about the future, sometimes referred to as “forward-looking statements,” within the meaning of the “safe harbor provisions” of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by the use of the words “anticipate,” “believe,” “estimate,” “project,” “expect,” “intend,” “plan,” “should,” and similar words and expressions. Statements that describe the Company’s future strategic plans, goals, or objectives are also forward-looking statements.
Readers of this report are cautioned that any forward-looking statements, including those regarding the management’s current beliefs, expectations, anticipations, estimations, projections, proposals, plans, or intentions, are not guarantees of future performance or results of events and involve risks and uncertainties. Factors that may impact such forward-looking statements include, but are not limited to:
changes adversely affecting the business in which we are engaged;
our ability to forecast trends accurately;
our ability to generate cash, service indebtedness and incur additional indebtedness;
our ability to raise financing in the future;
uncertainties around the final tax credits available to our customers or to Eos pursuant to the Inflation Reduction Act, uncertainties around our ability to secure conditional commitment or final approval of a loan from the Department of Energy LPO;
our ability to develop efficient manufacturing processes to scale and to forecast related costs and efficiencies accurately;
fluctuations in our revenue and operating results;
competition from existing or new competitors;
the failure to convert firm order backlog to revenue;
risks associated with security breaches in our information technology systems;
risks related to legal proceedings or claims;
the outcome of any legal proceedings that may be instituted against Eos;
risks associated with evolving energy policies in the United States and other countries and the potential costs of regulatory compliance;
risks associated with changes to U.S. trade environment;
risks resulting from the impact of global pandemics, including the novel coronavirus, Covid-19;
the ability to maintain the listing of Eos’s shares of common stock on NASDAQ;
the ability of Eos’s business to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees;
risks related to the inflationary economic environment;
risk from supply chain disruptions and other impacts of geopolitical conflict;
changes in applicable laws or regulations;
the possibility that Eos may be adversely affected by other economic, business, and/or competitive factors; and
other factors beyond our control.
2

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and, except as required by law, the Company assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. See also the “Risk Factors” disclosures contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional discussion of the risks and uncertainties that could cause the Company’s actual results to differ materially from those expressed or implied in its forward-looking statements.









3

Part I - Financial Information
EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)

September 30,
2022
December 31,
2021
ASSETS 
Current assets:  
Cash and cash equivalents$38,431 $104,831 
Restricted cash1,885 861 
Accounts receivable, net (allowance for expected credit losses of $8 and $9)
2,396 1,916 
Inventory, net23,193 12,976 
Vendor deposits9,283 16,653 
Notes receivable, net116 103 
Contract assets, current3,854 1,369 
Prepaid expenses915 2,595 
Other current assets1,562 1,268 
Total current assets81,635 142,572 
Property, plant and equipment, net29,823 12,890 
Intangible assets, net250 280 
Goodwill4,331 4,331 
Notes receivable, long-term, net3,678 3,547 
Operating lease right-of-use asset, net4,546 3,468 
Long-term restricted cash10,731  
Other assets, net3,487 2,087 
Total assets$138,481 $169,175 
LIABILITIES
Current liabilities:
Accounts payable $35,490 $12,531 
Accrued expenses15,966 7,674 
Accounts payable and accrued expenses - related parties 1,200 
Operating lease liability, current 1,067 1,084 
Note payable, current  4,926 
Long-term debt, current 2,822 1,644 
Contract liabilities, current 465 849 
Other current liabilities31 9 
Total current liabilities55,841 29,917 
Long-term liabilities:
Operating lease liability, long-term4,426 3,224 
Note payable, excluding current  13,769 
Long-term debt, excluding current 81,953 4,727 
Convertible notes payable - related party78,743 84,148 
Interest payable - related party1,590  
Contract liabilities, long-term956  
Warrants liability - related party137 926 
Other liabilities3,174 17 
Total long-term liabilities170,979 106,811 
Total liabilities226,820 136,728 
4

EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
September 30,
2022
December 31,
2021
COMMITMENTS AND CONTINGENCIES (NOTE 16)
SHAREHOLDERS' (DEFICIT) EQUITY
Common Stock, $0.0001 par value, 300,000,000 and 200,000,000 shares authorized, 74,082,289 and 53,786,632 shares outstanding on September 30, 2022 and December 31, 2021, respectively
8 5 
Preferred stock, $0.0001 par value, 1,000,000 shares authorized, no shares outstanding on September 30, 2022 and December 31, 2021
  
Additional paid in capital501,376 448,969 
Accumulated deficit(589,727)(416,527)
Accumulated other comprehensive income4  
Total shareholders' (deficit) equity(88,339)32,447 
Total liabilities and shareholders' (deficit) equity$138,481 $169,175 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Revenue  
Total revenue$6,065 $718 $15,258 $1,494 
Costs and expenses
Cost of goods sold50,025 12,904 122,468 25,357 
Research and development expenses4,462 5,118 14,889 13,818 
Selling, general and administrative expenses14,651 8,825 48,045 28,952 
Loss on pre-existing agreement   30,368 
Loss from write-down of property, plant and equipment496  2,501 11 
Grant expense, net 157 4 113 
Total costs and expenses69,634 27,004 187,907 98,619 
Operating loss(63,569)(26,286)(172,649)(97,125)
Other (expense) income
Interest expense, net(2,766)(132)(3,388)(307)
Interest expense - related party(2,960)(3,611)(7,798)(3,611)
Remeasurement of equity method investment   (7,480)
(Loss) gain on change in fair value of derivatives - related party(416)10,632 12,094 10,993 
Income from equity in unconsolidated joint venture   440 
(Loss) gain on debt (Extinguishment)/forgiveness(942)1,273 (942)1,273 
Other income (expense)41  (472)2,194 
Loss before income taxes$(70,612)$(18,124)$(173,155)$(93,623)
Income tax expense 110  45  
Net loss$(70,722)$(18,124)$(173,200)$(93,623)
Other comprehensive income
Foreign currency translation adjustment, net of tax(1) 4  
Comprehensive loss$(70,723)$(18,124)$(173,196)$(93,623)
Basic and diluted loss per share attributable to common shareholders
Basic$(1.12)$(0.34)$(3.00)$(1.79)
Diluted$(1.12)$(0.34)$(3.00)$(1.79)
Weighted average shares of common stock
Basic63,065,884 53,636,894 57,705,811 52,307,820 
Diluted63,065,884 53,636,894 57,705,811 52,307,820 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY
(In thousands, except share and per share amounts)
Common StockAdditional Paid in capitalContingently Issuable Common StockAccumulated Other Comprehensive IncomeAccumulated DeficitTotal
SharesAmount
Balances on June 30, 2022
58,519,739 $6 $461,165 $ $5 $(519,005)$(57,829)
Stock-based compensation— — 3,616 — — — 3,616 
Release of restricted stock units139,846 — — — — — — 
Cancellation of shares used to settle payroll tax withholding(38,534)— (77)— — — (77)
Issuance of common stock under conversion of Yorkville Note3,393,663 1 7,534 — — — 7,535 
Issuance of common stock under ATM program12,067,575 1 29,138 — — — 29,139 
Foreign currency translation adjustment— — — — (1)— (1)
Net loss— — — — — (70,722)(70,722)
Balances on September 30, 2022
74,082,289 $8 $501,376 $ $4 $(589,727)$(88,339)
Balances on June 30, 2021
53,353,858 $5 $436,372 $ $ $(367,810)$68,567 
Stock-based compensation— — 4,412 — — — 4,412 
Exercise of stock options36,660 — 318 — — — 318 
Exercise of warrants282,332 — 3,247 — — — 3,247 
Release of restricted stock units25,990 — — — — — — 
Net loss— — — — — (18,124)(18,124)
Balances on September 30, 2021
53,698,840 $5 $444,349 $ $ $(385,934)$58,420 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


7

EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY
(In thousands, except share and per share amounts)
Common StockAdditional Paid in capitalContingently Issuable Common StockAccumulated Other Comprehensive IncomeAccumulated DeficitTotal
SharesAmount
Balances on December 31, 2021
53,786,632 $5 $448,969 $ $ $(416,527)$32,447 
Stock-based compensation— — 10,993 — — — 10,993 
Exercise of warrants600 — 7 — — — 7 
Release of restricted stock units567,453 — — — — — — 
Cancellation of shares used to settle payroll tax withholding(166,690)— (929)— — — (929)
Issuance of common stock under conversion of Yorkville Note3,393,663 1 7,534 — — — 7,535 
Issuance of common stock under ATM program12,067,575 1 29,138 — — — 29,139 
Issuance of common stock under SEPA3,967,939 1 4,603 — — — 4,604 
Commitment fee for SEPA settled by common stock465,117 — 1,061 — — — 1,061 
Foreign currency translation adjustment— — — — 4 — 4 
Net loss— — — — — (173,200)(173,200)
Balances on September 30, 2022
74,082,289 $8 $501,376 $ $4 $(589,727)$(88,339)
Balances on December 31, 2020
48,943,082 $5 $395,491 $17,600 $ $(292,311)$120,785 
Stock-based compensation— — 10,085 — — — 10,085 
Release of Block B Sponsor Earnout Shares from restriction859,000 — — — — — — 
Issuance of Contingently Issuable Common Stock
1,999,185 — 17,600 (17,600)— — — 
Exercise of stock options123,837 — 1,074 — — — 1,074 
Exercise of warrants1,747,746 — 20,099 — — — 20,099 
Release of restricted stock units25,990 — — — — — — 
Net loss— — — — — (93,623)(93,623)
Balances on September 30, 2021
53,698,840 $5 $444,349 $ $ $(385,934)$58,420 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8

EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
Nine months ended
September 30,
 20222021
Cash flows from operating activities  
Net loss$(173,200)$(93,623)
Adjustment to reconcile net loss to net cash used in operating activities
Stock-based compensation10,993 10,085 
Depreciation and amortization3,847 1,794 
Loss from write-down of property, plant and equipment 2,501 11 
Loss (gain) on debt extinguishment/ (forgiveness)942 (1,273)
Amortization of right-of-use assets635 619 
Income from equity in unconsolidated joint venture (440)
Remeasurement of equity method investment 7,480 
Interest accretion and amortization of debt issuance costs704  
Interest accretion and amortization of debt issuance costs - related party3,121 2,111 
Commitment fee for SEPA agreement settled by common stock - related party1,061  
Gain on change in fair value of derivatives - related party(12,094)(10,993)
Changes in operating assets and liabilities:
Prepaid expenses1,677 977 
Inventory(10,217)(2,116)
Accounts receivable(488)(1,406)
Vendor deposits3,960 (7,173)
Contract assets(2,626)(13)
Accounts payable22,047 (339)
Accrued expenses5,949 1,915 
Accounts payable and accrued expenses - related parties(1,200)(2,517)
Interest payable - related party1,590 1,500 
Provision for firm purchase commitments  (5,475)
Operating lease liabilities(528)(586)
Contract liabilities572 1,122 
Note payable(19,637)18,530 
   Other 1,262 (795)
Net cash used in operating activities(159,129)(80,605)
Cash flows from investing activities
Investment in notes receivable(261)(4,724)
Business acquisition, net of cash acquired (160)
Investment in joint venture (4,000)
Purchases of property, plant and equipment(18,778)(11,346)
Net cash used in investing activities(19,039)(20,230)
Cash flows from financing activities
Principal payments on finance lease obligations(6)(9)
Proceeds from exercise of stock options 1,074 
Proceeds from exercise of public warrants7 20,099 
9

EOS ENERGY ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
Nine months ended
September 30,
 20222021
Proceeds from issuance of convertible notes - related party, net of issuance cost7,225 100,000 
Proceeds received from the Term Loan, net of discount92,783  
Payment of debt issuance costs(12,703)(4,369)
Proceeds from equipment financing facility4,216 7,000 
Repayment of equipment financing facility(1,208) 
Issuance of common stock under ATM program, net of commissions29,139  
Issuance of common stock under SEPA5,000  
Repurchase of shares from employees for income tax withholding purposes(929) 
Repayment of other financing (94)
Net cash provided by financing activities123,524 123,701 
Effect of exchange rate changes on cash and cash equivalents(1) 
Net (decrease) increase in cash, cash equivalents and restricted cash(54,645)22,866 
Cash, cash equivalents and restricted cash, beginning of the period105,692 121,853 
Cash, cash equivalents and restricted cash, end of the period$51,047 $144,719 
Non-cash investing and financing activities
Accrued and unpaid capital expenditures$1,492 $355 
Issuance of common stock under conversion of Yorkville Note7,534  
Issuance of convertible notes for interest paid in kind3,087  
Right-of-use operating lease assets in exchange for lease liabilities2,112 4,351 
Accrued and unpaid debt issuance costs5,231  
Supplemental disclosures
Cash paid for interest$2,490 $233 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10


EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

1.Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Eos Energy Enterprises, Inc. (the “Company” or "Eos") designs, develops, manufactures, and sells innovative energy storage solutions for utility-scale microgrid, and commercial & industrial (“C&I”) applications. Eos has developed a broad range of intellectual property with multiple patents ranging from the unique battery chemistry, mechanical product design, energy block configuration and software operating system (“Battery Management System” or “BMS”). The BMS software uses proprietary, Eos-developed algorithms and includes ambient and battery temperature sensors, as well as voltage and electrical current sensors for the electrical strings and the system. Eos focuses on developing and selling safe, reliable, long-lasting and low-cost turn-key alternating current (“AC”) integrated systems using Eos’ direct current (“DC”) battery energy storage system. The Company has a manufacturing facility in Turtle Creek, Pennsylvania to produce DC energy blocks with an integrated BMS. The Company’s primary applications focus on integrating battery storage solutions with: (1) renewable energy systems that are connected to the utility power grid; (2) renewable energy systems that are not connected to the utility power grid; (3) energy systems utilized to relieve congestion; and (4) storage systems to assist C&I customers in reducing their peak energy usage or participating in the utilities ancillary and demand response markets. The Company’s major market is North America with opportunistic growth opportunities in Europe, Oceania, Africa, and Asia.
Unless the context otherwise requires, the use of the terms “Eos,” “the Company,” “we,” “us,” and “our” in these notes to the unaudited condensed consolidated financial statements refers to Eos Energy Enterprises, Inc. and its consolidated subsidiaries.
Liquidity and Going Concern
Under U.S. GAAP, the Company is required to perform a two-step analysis of its ability to continue as a going concern: It must first evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued or available to be issued (Step 1). If the Company concludes that substantial doubt is raised, it is also required to consider whether the Company’s plans alleviate the substantial doubt (Step 2).
The Company continues to scale its operations, including deploying additional capital for capacity expansion to meet current customer demand. To date, the Company has incurred significant recurring losses and net operating cash outflows from operations. Operating expenses consist primarily of costs related to the Company’s research and development, sales activities, and recurring general and administrative expenses. Management and the Company’s Board of Directors expect the Company will eventually reach a scale of profitability through the sale of battery energy storage systems and other complementary products and services, and therefore, the Company believes the current stage of the Company’s lifecycle justifies continued intensive investment in the development and launch of products. Accordingly, the Company expects to continue to incur significant losses and net operating cash outflows from operations for the foreseeable future and to continue to require additional capital to fund the Company’s operations and obligations as they become due, including funding that is necessary to continue to scale up the Company’s operations to allow for the delivery of backlog, to secure additional order opportunities for its battery storage systems, and to continue to invest in research and development.
As of September 30, 2022, the Company had total assets of $138,481, including cash, cash equivalents and restricted cash of $51,047 (refer to Note 4, Cash, Cash Equivalents and Restricted Cash), total liabilities of $226,820, which includes the total amounts owed on the Company’s outstanding convertible notes payable of $78,743 and long-term debt of $84,775 (refer to Note 12, Borrowings) and a total accumulated deficit of $589,727, which is primarily attributable to the significant recurring losses the Company has accumulated since inception. The Company used cash in operating activities of $159,129 for the nine months ended September 30, 2022.
The Company has historically relied on outside capital to fund its cost structure and expects this reliance to continue for the foreseeable future until the Company reaches profitability through its planned revenue generating activities.
11

EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

1. Nature of Operations and Summary of Significant Accounting Policies (cont.)
During the third quarter of 2022, the Company obtained the following additional financing: (a) the Company borrowed $94,681 under a Senior Secured Term Loan agreement (the “Term Loan”) to fund the Company’s manufacturing capacity, repay an existing outstanding note, and for general corporate purposes; (b) the Company borrowed an additional $4,216 under the equipment financing facility with Trinity Capital, Inc.; and (c) the Company entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”) with respect to an at-the-market offering program. Under the at-the-market-offering program, the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, having an aggregate offering price up to $100,000 through Cowen as sales agent and/or principal. The Company will pay Cowen a commission equal to 3.0% of the gross sales proceeds of any shares of the Company’s common stock sold through Cowen. In the third quarter, under this at-the-market program, the Company issued and sold a total of 12,067,575 shares and raised $30,040 ($29,139 net of commissions) at an average selling price of $2.49 per share.
The Term Loan agreement contains customary affirmative and negative covenants, which limit the Company’s and its subsidiaries’ ability to incur indebtedness, make restricted payments, including cash dividends on its common stock, make certain investments, loans and advances, enter into mergers and acquisitions, sell, assign, transfer or otherwise dispose of its assets, enter into transactions with its affiliates and engage in sale and leaseback transactions, among other restrictions (refer to Note 12, Borrowings). The Company was in compliance with all Term Loan covenants as of September 30, 2022.
In the second quarter of 2022, the Company entered into a $200,000 common stock Standby Equity Purchase Agreement (“SEPA”) with YA II PN, Ltd. an affiliate of Yorkville Advisors, which was subsequently amended on June 13, 2022. The SEPA gives the Company the right, but not the obligation, to sell up to $200,000 of common equity to Yorkville at times of the Company’s choosing during the two-year term of the agreement. The SEPA provides for shares to be issued to Yorkville at a discounted price of 97.0% of the 3-day volume-weighted average price following notification to Yorkville that the Company seeks to draw upon the facility (refer to Note 11, Related Party Transactions and Note 12, Borrowings). Through the date of this filing, funds raised under the SEPA were $12,500; the Company did not utilize the SEPA in the third quarter.
As previously reported, the Company has moved through Part I of the application under the U.S. Department of Energy’s Loan Guarantee Solicitation for Applications for Renewable Energy Projects and Efficient Energy Projects (the “DOE Loan Program”) and submitted an application under Part II of the loan program in May 2022. In September 2022, the Company was invited to the due diligence stage of the DOE Loan Program. During this stage, the Company and the DOE will work to negotiate a term sheet setting out the principal terms and conditions of the loan. This work provides the DOE the foundation to advance the loan towards a conditional commitment. However, the DOE invitation to the due diligence stage is not an assurance that the DOE will offer a conditional commitment, or that the Company will secure a loan under the DOE Loan Program. The Company is seeking additional capital through securities offerings, other financing arrangements and grants to raise additional funding to support its operations.
There can be no assurance that the Company will be able to utilize the full value under the Sales Agreement with Cowen, utilize the SEPA to its full $200,000 capacity, successfully complete the DOE Loan Program, or otherwise be able to obtain new funding from other sources on terms acceptable to the Company, on a timely basis, or at all.
As of the date the accompanying condensed consolidated financial statements were issued, management concluded that the Company did not have sufficient capital on hand to support its current cost structure for twelve months after the date the accompanying condensed consolidated financial statements were issued. The Company expects to continue to incur significant losses and net operating cash outflows from operations for the foreseeable future. The Company expects to continue to require additional capital to fund operations and meet its obligations as they become due. The Company believes these uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. If the Company is unable to raise additional capital, on acceptable terms, or at all, the Company may have to significantly delay, scale back or ultimately discontinue the development or commercialization of its product and/or consider a sale or other strategic transactions.
12

EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

1. Nature of Operations and Summary of Significant Accounting Policies (cont.)
The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going-concern, which contemplates the Company will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of the Company and its 100% owned, direct and indirect subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All intercompany transactions and balances have been eliminated in the preparation of the condensed consolidated financial statements. These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. These interim results are not necessarily indicative of results for the full year.
Reclassification of Prior Year Presentation
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
Foreign Currency
The Company follows the provisions of ASC 830, Foreign Currency Matters. The Company’s foreign subsidiaries use the local currency of their respective countries as their functional currency. The assets and liabilities of foreign operations are translated at the exchange rates in effect at the balance sheet date. The operating results of foreign operations are translated at weighted average exchange rates. The related translation gains or losses are reported as a separate component of shareholders’ (deficit) equity in accumulated other comprehensive loss. Gains and losses from foreign currency transactions, which were insignificant for the three and nine months ended September 30, 2022 and 2021, are included as other income (expense) in the condensed consolidated statements of operations and comprehensive loss.
Recently Adopted Accounting Pronouncements
On January 1, 2021, the Company adopted ASU 2016-02, Leases (“Topic 842”), using the transition method introduced by ASU 2018-11, which does not require revisions to comparative periods. The adoption of the new standard resulted in the recording of lease assets and lease liabilities of $3,662 and $4,465, respectively, as of January 1, 2021. The difference between the lease assets and lease liabilities primarily relates to deferred rent recorded in accordance with the previous leasing guidance. The new standard did not materially impact the Company’s condensed consolidated statements of operations and comprehensive loss or statements of cash flows.
On January 1, 2021, the Company adopted ASU No. 2016-13, Financial Instruments-Credit Losses (“Topic 326”), and the subsequent amendments. The standard sets forth an expected credit loss model which requires the measurement of expected credit losses for financial instruments based on historical experience, current conditions and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost, and certain off-balance sheet credit exposures. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.
13

EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

1. Nature of Operations and Summary of Significant Accounting Policies (cont.)
Recent Accounting Pronouncements
As of September 30, 2022, the Company implemented all applicable new accounting standard updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”) that were in effect. There were no new standards or updates issued during the nine months ended September 30, 2022 that would have a material impact on the Company’s condensed consolidated financial statements.
2. Acquisition
On April 8, 2021, the Company entered into a unit purchase agreement (the “Purchase Agreement”) with Holtec Power, Inc. (“Holtec”). In accordance with the terms and conditions of which the Company purchased from Holtec the remaining 51% interest in HI-POWER, LLC (“Hi-Power”) that was not already owned by the Company. Hi-Power was incorporated as a joint venture between the Company and Holtec in 2019. In connection with the transaction, the Company also entered into a transition services agreement and a sublease with Holtec. The transaction closed on April 9, 2021. Following the consummation of the transactions set forth in the Purchase Agreement (the “Transactions”), Hi-Power became a 100% indirect, wholly-owned subsidiary of the Company and the obligations of the parties under the Hi-Power joint venture terminated.
The aggregate purchase price of $25,000 shall be paid pursuant to the following schedule: $5,000 on each of May 31, 2021, May 31, 2022, May 31, 2023, May 31, 2024, and May 31, 2025, as evidenced by a secured promissory note secured by the assets of the Company. The Purchase Agreement also required that the Company pay to Holtec, on the closing of the Transactions, an amount in cash equal to $10,283. Total payments to Holtec under this Purchase Agreement will be $35,283. During the third quarter of 2022, the Company repaid all outstanding amounts under the Purchase Agreement, which resulted in a loss on debt extinguishment of $942.
The fair value of these payments was $33,474 at the Acquisition Date and included $32,750 allocated to the termination of a pre-existing agreement with Holtec and $724 allocated to the acquisition.
The obligations and rights of both parties under the pre-existing Joint Venture Agreement were terminated at the time of acquisition and $32,750 of the fair value of the consideration transferred was allocated to the termination of the agreement, which resulted in a loss on the pre-existing agreement of $ and $30,368 for the three and nine months ended September 30, 2021, respectively.
Prior to the acquisition of the remaining 51% ownership interest in Hi-Power, the Company accounted for its initial 49% ownership interest in Hi-Power as an unconsolidated joint venture under the equity method of accounting. In connection with the acquisition of the remaining 51% ownership interest in Hi-Power, the Company’s condensed consolidated financial statements include all of the accounts of Hi-Power, and all intercompany balances and transactions have been eliminated in consolidation. The results of operations of Hi-Power have been included in the Company’s condensed consolidated financial statements since the date of acquisition.
The consideration transferred for the 100% ownership interest in connection with the acquisition, net of intercompany balances between the Company and Hi-Power, totaled $418, of which $205 represents the fair value of the Company’s previously held 49% ownership interest in Hi-Power. In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, the Company remeasured the previously held 49% ownership interest in Hi-Power at its acquisition date fair value. As of the acquisition date, a loss of $7,480 was recognized in earnings for the remeasurement of the previously held 49% ownership interest.





14

EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

2. Acquisition (cont.)
The following table summarizes the final allocation of the purchase price to the fair values of the assets acquired and liabilities assumed as of the Acquisition Date.
Amount
Inventory$2,666 
Vendor deposits818 
Property, plant and equipment, net74 
Goodwill4,331 
Accounts payable and accrued expenses(3,634)
Provision for firm purchase commitments(3,890)
Net assets acquired, net of cash and cash equivalents of $53 (1)
$365 
(1) Net assets acquired exclude the intercompany balance between Eos and Hi-Power and cash acquired.
The Company expects the goodwill recognized as part of the acquisition will be deductible for U.S. income tax purposes. The Company also incurred insignificant non-consideration acquisition expenses including legal and accounting services related to the acquisition, which are recorded in selling, general and administrative expenses on the Company’s condensed consolidated statements of operations and comprehensive loss.
3. Revenue Recognition
The Company primarily earns revenue from sales of its energy storage systems and services including installation, commissioning, and extended warranty services. Product revenues, which are generally recognized at a point in time, and service revenues, which are generally recognized over time, are as follows:
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2022202120222021
Product revenue$6,055 $714 $15,120 $1,478 
Service revenue10 4 138 16 
Total revenues$6,065 $718 $15,258 $1,494 
With respect to contracts for which revenue is recognized over time, the Company performs reviews of the progress and execution of its performance obligations under these contracts periodically. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs. Based upon these reviews, if at any time management determines that in the case of a particular contract total costs will exceed total contract revenue, a provision for the entire anticipated contract loss is recorded at that time. The Company recognized losses from contracts of $444 and $1,693 for the three and nine months ended September 30, 2022, respectively. No loss was recognized for the three and nine months ended September 30, 2021.
For the three months ended September 30, 2022, the Company had two customers who accounted for approximately 86.5% and 13.4% of the total revenue, respectively, and for the nine months ended September 30, 2022, the Company had one customer who accounted for 78.4% of the total revenue.
For the three months ended September 30, 2021, the Company had three customers who accounted for 49.4%, 33.0% and 17.5% of the total revenue and for the nine months ended September 30, 2021, the Company had three customers who accounted for 64.7%, 15.9% and 11.0% of the total revenue, respectively.


15

EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
3. Revenue Recognition (cont.)
Contract assets and Contract liabilities
The following table provides information about contract assets and contract liabilities from contracts with customers. Contract assets, current and contract liabilities are included separately on the condensed consolidated balance sheets and contract assets, long-term are included under other assets, net.
 September 30,
2022
December 31,
2021
Contract assets$3,995 $1,369 
Contract liabilities$1,421 $849 
The Company recognizes contract assets for certain contracts in which revenue recognition performance obligations have been satisfied, however, invoicing to the customer has not yet occurred. Contract liabilities primarily relate to consideration received from customers in advance of the Company’s satisfying performance obligations under contractual arrangements. Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period.
Contract assets increased by $2,626 during the nine months ended September 30, 2022 due to recognition of revenues for which invoicing has not yet occurred. Contract liabilities increased by $572 during the nine months ended September 30, 2022, reflecting $1,184 in customer advance payments, partially offset by the recognition of $612 of revenue during the nine months ended September 30, 2022 that was included in the contract liability balance at the beginning of the period.
Contract liabilities of $465 as of September 30, 2022 are expected to be recognized within the next twelve months and long-term contract liabilities of $956 are expected to be recognized as revenue over approximately the next three years. Contract assets of $3,854 as of September 30, 2022 are expected to be recognized within the next twelve months. Long-term contract assets of $141 are expected to be recognized as accounts receivable over approximately the next three years.
4. Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents, and restricted cash reported within the accompanying condensed consolidated balance sheets that sum to the total of the same such amounts presented in the accompanying condensed consolidated statements of cash flows consisted of the following:

September 30,
2022
December 31,
2021
September 30,
2021
Cash and cash equivalents$38,431 $104,831 $144,194 
Restricted cash1,885 861 525 
Long-term restricted cash10,731   
    Total cash, cash equivalents, and restricted cash $51,047 $105,692 $144,719 
5. Inventory
The following table provides information about inventory balances:
 September 30,
2022
December 31,
2021
Raw materials$23,065 $11,898 
Work-in-process128 43 
Finished goods 1,035 
     Total inventory, net$23,193 $12,976 
16

EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
6. Property, Plant and Equipment, Net
The following table provides information about property, plant and equipment, net balances:
 Estimated Useful livesSeptember 30,
2022
December 31,
2021
Equipment
3 to 10 years
$25,160 $13,489 
Finance lease5 years379 226 
Furniture
3 to 10 years
1,688 808 
Leasehold improvementsLesser of useful life/
remaining lease
5,383 2,933 
Tooling
2 to 3 years
6,821 3,053 
     Total39,431 20,509 
Less: Accumulated depreciation (9,608)(7,619)
Total property, plant and equipment, net$29,823 $12,890 
Depreciation expense related to property, plant and equipment was $1,571 and $687 for the three months ended September 30, 2022 and 2021, respectively, and $3,817 and $1,764 for the nine months ended September 30, 2022 and 2021, respectively.
For the three and nine months ended September 30, 2022, the Company recorded a loss from write-down of property, plant and equipment of $496 and $2,501, respectively. For the three and nine months ended September 30, 2021, the loss from write-down of property, plant and equipment was $ and $11, respectively.
7. Intangible Assets
Intangible assets consist of various patents valued at $400, which represents the cost to acquire the patents. These patents are determined to have useful lives and are amortized into the results of operations over ten years. The company recorded amortization expense of $10 for each period for the three months ended September 30, 2022 and 2021, respectively, and $30 for each period for the nine months ended September 30, 2022 and 2021 related to patents, respectively.
Estimated future amortization expense of intangible assets as of September 30, 2022 are as follows:
Amortization Expense
Remainder of 2022$10 
202340 
202440 
202540 
202640 
Thereafter80 
Total$250 
8. Notes Receivable, Net and Variable Interest Entities (“VIEs”) Consideration
Notes receivable primarily consist of amounts due to the Company related to the financing offered to certain customers. The Company reports notes receivable at the principal balance outstanding less an allowance for losses. The estimate of credit losses is based on historical trends, customers’ financial condition and current economic trends, all of which are subject to change. The Company charges interest at a fixed rate and calculates interest income by applying the effective rate to the outstanding principal balance.
17

EOS ENERGY ENTERPRISES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
8. Notes Receivable, Net and Variable Interest Entities (“VIEs”) Consideration (cont.)

The Company had notes receivable of $3,794 and $3,650 outstanding as of September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022 and December 31, 2021, the Company recorded an allowance for expected credit loss from the notes receivable of $7 and $6, respectively.
The customers to whom the Company offers financing through notes receivables are VIEs. However, the Company is not the primary beneficiary, because the Company does not have power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance. Therefore, the VIEs are not consolidated into the Company’s consolidated financial statements but rather disclosed in the notes to the Company’s consolidated financial statements under ASC 810, Consolidation. The maximum loss exposure is limited to the carrying value of notes receivable as of the balances sheet dates.
9. Accrued Expenses
Accrued expenses were as follows:
September 30,
2022
December 31,
2021
Accrued payroll$4,659 $3,069 
Warranty reserve3,956 2,112 
Accrued legal and professional expenses987 826 
Provision for contract losses